Retrial set for 2 Merrill Lynch execs

HOUSTON 
Two former Merrill Lynch & Co. executives whose 2004 Enron-related fraud and conspiracy convictions were overturned are set to be retried next year, a federal judge ordered Friday.

But U.S. District Judge Ewing Werlein Jr. encouraged prosecutors and defense attorneys to resolve the long-running case before it goes to trial again.

"This has a rather long history at this point. Young lawyers like you probably weren't born" when it began, Werlein joked with prosecutor Patrick Stokes, who along with others in the courtroom laughed.

Stokes said he and defense attorneys are talking.

"We are considering alternative ways of resolving the case," he said.

Both Stokes and defense attorneys declined to comment after the court hearing.

For now, jury selection in the retrial of Daniel Bayly and Robert S. Furst is set to begin Feb. 8.

Bayly, Furst and a third executive, James A. Brown, were convicted in 2004 of conspiracy and wire fraud. They're accused of helping push through Enron's sham sale to Merrill Lynch of three power barges moored off the Nigerian coast in 1999. The deal was struck to make the earnings of Enron's energy division appear larger.

Bayly was given a 2 1/2-year sentence; Furst three years and Brown a three-year, 10-month term.

Enron Corp. filed for bankruptcy protection in December 2001, after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.

The 5th U.S. Circuit Court of Appeals in New Orleans threw out the convictions in 2006 after finding fault with the prosecution's legal theory known as "honest services."

The court said the executives were doing what Enron wanted them to do and did not profit at its expense. As a result, the court ruled, they did not deprive Enron of "honest services."

But the opinion also said it "should not be read to suggest that no dishonest, fraudulent, wrongful or criminal act has occurred."

Prosecutors removed the "honest services" language from the indictment.

The appeals court upheld Brown's convictions of perjury and obstruction of justice for lying to a grand jury about the nature of the deal.

Bayly and Furst were set to be retried last year but they filed another appeal with the 5th Circuit, arguing a retrial would violate their constitutional protections against double jeopardy. The appeals court in June ruled retrying the three ex-Merrill Lynch executives would not result in such a constitutional violation.

Brown's attorneys have indicated in court filings they intend to appeal the 5th Circuit's decision to the Supreme Court.

Attorneys for all three men have argued no crime was committed by the Merrill Lynch executives because Enron orchestrated the scheme and that no money or property was lost.

Bayly was Merrill Lynch's former head of investment banking. Furst was Merrill's Enron relationship manager and Brown was an accountant.